It has become a humorous internet meme to point out changes in the environment spurred by global lockdowns, and conclude that the planet is renewing itself. Odd sights such as wild goats taking over a Welsh seaside town or jellyfish swimming up the freshly-clean waters of a Venice canal are signs of “healing”.
On Sunday, an illustration of the existential threat to Ireland’s shuttered retail industry became wrapped up in the meme. Martyn Rosney, a public-relations executive, tweeted a picture of cobblestones on the 13th most expensive shopping street in the world: “Grass is growing on Grafton Street. Nature is healing.”
Sure enough, directly outside the Dunnes Stores outlet, green shoots of fresh grass were springing up on the deserted street's paving upon which, normally, close to 9,000 people walk each hour. The sight of vegetation was truly bizarre.
Rosney’s wry tweet was funny, a playful take on post-apocalypse. But the threat facing the Republic’s shopping thoroughfares is no laughing matter.
Under pressure from online shopping and overspill effects of the decline of UK high streets, the Irish retail sector was already facing challenges. The impact of Covid-19, which has necessitated putting the economy into a coma, has transformed retail’s challenge from a hillock into Everest.
Scaling it looks daunting. Industry lobbyists are warning that four in 10 retailers could go bust without significant State intervention.
Last week was a particularly gloomy portent of the carnage to come. On April 15th, the Irish operations of fashion outlets Oasis and Warehouse were put into liquidation, killing 248 jobs, 13 stores and 29 concession stands. The move came after its parent in the UK entered administration.
The next day, provisional liquidators were appointed to wind up the 11 Irish department stores owned by Debenhams, with the loss of 2,000 jobs. It had lost an estimated €40 million over the past two years. Its demise was spurred by the administration of its UK parent, again. Debenhams in the UK previously entered administration 12 months ago.
Last Friday, the five Irish Laura Ashley boutiques entered provisional liquidation with the loss of 76 jobs, the crowning effect of a hat-trick of UK parent group administrations. The shuttering of Dublin's two Cath Kidston outlets was announced this week.
But even before Covid-19 suddenly swept into the retail sector, the closures were already mounting up. The Irish arms of the sister brands of Oasis and Warehouse, Karen Millen and Coast, entered liquidation in 2018. House of Fraser closed in Dundrum Town Centre in February. The US apparel group Forever 21 entered bankruptcy last year, nixing its huge Jervis Street store.
Not even the country’s prime shopping thoroughfare has escaped the sector’s churn. Kids’ stationery sensation Smiggle signed up for a Grafton Street outlet in 2018. By early 2020, it hadn’t appeared.
Topman recently left Grafton Street, as did Urban Decay and Ecco shoe shop. Insolvency was not a factor in any of the Grafton Street vacancies mentioned here. But clusters of shuttered shops are not a good look on such an expensive street, and have contributed to the sense of a sector in a state of flux.
With most retail outlets closed due to Covid-19 until at least May 5th, and probably longer, that state of flux has been upgraded to a state of chassis. It is only April. But for Irish retail, winter is looming.
"Unfortunately, there is likely to be another wave of restructuring activity in retail," said restructuring expert Stephen Tennant, a partner in Grant Thornton. "There has to be. We have been in discussions with some retailers recently."
Retail insolvencies in the UK were already at a five-year high, and this trend will accelerate. That will spur more closures of their Irish arms in the near future, further eroding some of the current fabric of our shopping streets. But many indigenous retailers will also go the wall.
David Fitzsimons, chief executive of industry lobby group Retail Excellence, estimates that in a best-case scenario, about 15 per cent of all retailers could fall victim to the coronavirus lockdowns: "In the worst case, we could lose 40 per cent if the Government sits on its hands."
It wants sweeping interventions to prop up the sector, and has called for about a further €2 billion in supports, through initiatives such as cancelling rates for 12 months and the State stepping in to pay 60 per cent of rents during closures.
Retail Excellence, which has 2,200 members, has been consulting with its members to grade them into three broad streams. Group A is made up of retailers that will definitely reopen once the restrictions are lifted. Group B is retailers who will reopen and give it six months to see if they are still viable. Group C comprises those who will close immediately.
For those that do reopen, straitened circumstances of consumers and social distancing measures mean sales will inevitably be crimped. Fitzsimons says nascent lockdown reopenings elsewhere in Europe show consumers are extremely cautious over health fears. A chunk of sales has been lost to online “forever”.
From its discussions with chief executives, Retail Excellence says the most optimistic retailers believe they may generate up to 70 per cent of normal sales for the period beginning when they reopen until the end of the year. The most pessimistic believe they may only generate 20 per cent of normal weekly turnover.
This range chimes with the average estimated by Tennant, who believes many retailers will reopen with trading of 40 to 50 per cent of previous levels, before building up business gradually.
“In certain retail businesses, a lot of bricks-and-mortar stores are frequented by older shoppers and it is possible they are not shopping again this year due to the virus restrictions,” he said.
It isn’t just elderly consumers who are reticent to shop. Goodbody Stockbrokers says new daily credit- and debit-card data from the Central Bank suggests consumer spending is down 40 per cent this month. But that may be the trough.
“The month of April will represent the worst of this year,” said Dermot O’Leary, Goodbody’s chief economist. “It should improve as the months wear on.”
He sounded another warning, however, about the risk of repeated or “rolling” lockdowns that may be required if the virus keeps re-emerging each time restrictions are lifted. The fear generated by this would have an impact on spending that would be “multiple times larger” than the fear that once prevailed over the risk of a no-deal Brexit.
If and when furloughed workers get back to work, O’Leary believes unemployment could settle at between 9 and 12 per cent, which he says will seriously crimp consumer spending early in any recovery: bad news for retail.
“It will be only when we get into the late-cycle period and consumers feel flaithiúlacht that consumer spending will kick in again,” he said.
Once recovery begins, there have been calls for the State to fund a targeted stimulus scheme for sectors such as retail by, possibly, providing free gift vouchers to all citizens with a time limit to spur a fillip in spending. O’Leary believes this would be a “good idea”.
“Last time it was the banks. But this time round, we may get the bailout,” he said, as he suggested that citizen vouchers could be an effective vehicle to distribute targeted stimulus to retailers.
While he acknowledges that the State had to move quickly to design emergency financial measures to support the economy, he is wary about blanket taxpayer bailouts for entire sectors such as retail, especially when some in the sector might be hopelessly insolvent: “Nobody is talking about moral hazard this time round. But it is definitely a risk.”
If trouble is coming for retailers, then grief is also on its way for their landlords. Sources suggest that some landlords are reporting that perhaps as low as a fifth of retail rents due to them may have been paid this month, with half of that paid monthly as opposed to the usual quarterly transfers. It may drop lower in May.
There is often a healthy friction between commercial landlords and tenants. But Kevin Sweeney, director of retail at property agency Savills, insists both sides can "empathise" with each other's predicament and deals will be struck.
“You’ve got to find a way,” he says.
Fitzsimons has suggested that rent bills for the closure period be 60 per cent covered by the State, with 20 per cent paid by tenants and the final fifth covered by landlords. Dialogue is ongoing between the property sector, the State and retail bodies.
“We need something,” says Fitzsimons. “Without it, there will be no recovery. Pension funds will be hit, landlords will be in trouble and so will retailers.”
Regardless of whatever deals are struck, there will be a surfeit of vacant retail units. Big city department store units pose a particular problem, as they will find it difficult to source new tenants willing to take on such large units.
Even before Covid-19, it was reported that the large Dundrum unit that had been home to House of Fraser could be split between Penney’s and Brown Thomas. Sweeney believes a similar split would be “the best use” of the flagship Debenhams outlet on Henry Street in Dublin.
Dublin will retain its place in the hierarchy of attractive European cities for foreign retailers, argues Sweeney. New tenants will be found, he believes.
Fitzsimons, however, raised the issue of how shuttered units will affect retailers that stay open nearby, or in some cases, within shuttered units. For example, Spanish fashion giant Zara will remain trading within the old Debenhams units in Henry Street and also Blanchardstown shopping centre.
“This issue of adjacencies needs to be looked at,” Fitzsimons says. “Because closures are a virus like Covid-19. It will spread.”
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On Wednesday, Retail Excellence distributed a circular to its members to kick-start planning for whenever non-essential stores may reopen.
“Re-opening will not lead to an immediate return of demand. It is likely that the Irish consumer will re-emerge very gradually and cautiously,” it said.
Health concerns will be paramount for consumers and addressing these should be the top priority, it was suggested. Here are just a few of the potential measures that Retail Excellence says should be considered:
– Personal protective equipment may be required for all staff
– Official public health advice may conclude that infrared thermometers are necessary to check temperatures of staff and customers at shopping centres
– Some retailers may consider mandatory Covid-19 testing for returning staff
– Daily temperature testing for all staff may be implemented by some retailers
– Fumigation of stores prior to reopening
– Smaller stores may need to remove fixtures to allow social distancing
– Staff to wash their hands once every hour
